The Professional Association of Georgia Educators said it is concerned about losses at JPMorgan Chase, the banking behemoth whose shares represent a $251 million chunk of the Teachers Retirement System of Georgia's holdings.
Those JPMorgan Chase shares were worth $291 million at the end of June, but the bank’s stock began to slide when it disclosed that it has lost $2 billion because of a complicated trading bet.
TRS, which manages retirement funds for teachers in Georgia, has an overall portfolio of worth nearly $55 billion, made up of individual stocks and other investment vehicles. The $40 million loss the system has suffered so far because of JPMorgan Chase represents less than one-tenth of 1 percent of the system’s overall holdings.
TRS Executive Director Jeffery Ezell said the system's view of JPMorgan Chase has not changed, and it has no plans to dump its 7 million shares of the bank's stock.
However, PAGE spokesman Tim Callahan said the type of bet JPMorgan Chase made and lost on is one of the reasons for his concern.
“Our funds have traditionally been well-managed in a conservative way, but with the advent of more exotic and higher risk investments, more caution is in order,” Callahan said. “Retirement funds don’t belong, in our view, in investments that the brokers themselves cannot understand.”
JPMorgan Chase’s loss came through a credit default swap, a complex investment that typically pays off when certain loans go into default.
The bank’s chief executive officer, Jamie Dimon, has pushed back against federal banking regulations, arguing that sound banks such as his should not be lumped in with banks that make poor decisions.
The Associated Press on Monday reported that Dimon said his bank is suspending plans to buy back its own stock. He said the bank will continue to pay a dividend despite the trading loss, which he described as “an embarrassment” and a “black mark” that will nonetheless leave the bank’s balance sheet “barely nicked.”
TRS has no trigger that would automatically lead to a dumping of the stock after losses reached a certain point.
“We don’t utilize those,” Ezell said of triggers. “We look at the company itself.”
And that company, Dimon insisted Monday, remains strong.
Ezell said TRS doesn’t consider the $40 million drop in the value of its JPMorgan Chase holdings to be a loss. “We don’t view it as a loss until you sell the stock,” he said.
Ezell shared Dimon’s assessment of JPMorgan Chase’s trading mistake as an error that won’t cause the bank lasting damage.
“Relative to the earnings and the size of JPMorgan, it has a very limited impact," Ezell said.
Partly because of the types of bets JPMorgan Chase recently lost on, stock portfolios across the country took a beating in 2007 and 2008. Retirees who had been counting on their investments to fund their retirement suddenly found themselves broke or back in the workforce or both.
Ezell said retired teachers "don’t need to be concerned one iota" because of JPMorgan Chase’s bad bet.
Based on stock value, JPMorgan Chase is TRS’ 10th largest equity holding, and Ezell said the system’s funds are managed in a way to limit risks.
“We’re very conservative,” he said. “We’re very diversified. [Retired teachers] do not need to be concerned about fluctuations up or down. We can hold things for a long time. We can weather things in the market.”
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